On Sunday, President Mahmoud Ahmadinejad
officially ordered the implementation of the subsidy reform plan. In an open
session on January 5 the Majlis overwhelmingly ratified the subsidy reform plan
and later on January 13 the Guardian Council endorsed the approval.

The goal of the subsidy reform plan is to bring
prices to their true market level within a five-year period. The plan mainly
targets energy prices.

According to the plan, the administration is obligated to reform the energy
prices by the end of the fifth development plan (2010-2015).

The plan calls for prices of oil derivatives not to be less than 90% of the
prices in the Persian Gulf market.

The plan also seeks to bring the average selling price of electricity and
natural gas for domestic consumption to match their production costs, although
the plan will allow the administration to set the preferable prices according to
the geographical location, time, place and type of consumption.

The price of water, likewise, will also be set to match its final cost. The plan
also calls on the administration to take into account the transference and
distribution costs as well as the geographical location, time, place, type and
level of consumption.

The plan also requires the administration to reform subsidies on wheat, rice,
cooking oil, sugar and milk, air, and postal services.